h ll k i i i hi hThe Yellow Page Market in transition – which business models can profit besides Google?

prepared for b-to-v Core Croup Internet and Mobile

St. Gallen, March 2009

Overview

1. Introduction

2. Market

3. Segments & Funding

4 S f l l4. Successful players

5. Findings & Discussiong

6. About b-to-v

p. 2

Growth of online e-advertising despite crises

p. 3

Shift of advertising spend towards online media

p. 4

Some „major brands“ in German online publishing

p. 5

Overview

1. Introduction

2. Market

3. Segments & Funding

4 S f l l4. Successful players

5. Findings & Discussiong

6. About b-to-v

p. 6

Local advertising – What’s the occasion?

Consumers are searching...

– 66% typically find what they need when

...but small business is not capitalizing.

– Only 44% of small businesses have a Web66% typically find what they need when searching on the Web, though 39% have trouble finding specific businesses when they are not adequately represented on

Only 44% of small businesses have a Web site.

– Of those that do have a Web site, 61% spend less than three hours a week

the Web.

– 92% of Internet users have researched a product or service online, then purchased

spend less than three hours a week marketing their Web site.

– Of small businesses that have a Web site, 51% believe both the quality and ability

p poffline from a local business at least once.

– 71% of consumers feel the local business Web sites they visit are good or great.

51% believe both the quality and ability of their site to acquire new customers is only “fair” or “poor.”

78% f ll b i d diWeb sites they visit are good or great. 29% feel they are “fair” to “very bad.”

– 82% say search engines were among the many tools they use to find local

– 78% of small business owners dedicate 10% or less of their overall budget to marketing efforts.

many tools they use to find local businesses.

– Half of small business owners spend less than 10% of their marketing budget on Internet advertising, while 30% do no Internet advertising at all

p. 7

Internet advertising at all.

Source: Study by webvisible & Nielsen: The Great Divide 2008 (issued 2009)

This is also true for the German-speaking market

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… it is reflected by website popularity

p. 9

U.S. expects local ads shift towards digital media

p. 10

U.S. expects interim decline of local media & ad spend

p. 11

However, remaining spend will shift towards digital

p. 12

Customer survey

Private consumers

Which of the following advertising resources

Small business owners as consumers

Which of the following advertising resourcesWhich of the following advertising resources do you turn to first to locate a local business?

50% Search Engines

Which of the following advertising resources do you turn to first to locate a local business?

41% Search Engines

24% Yellow Pages Directories

10% Internet Yellow Pages

4% Local Newspapers

31% Yellow Pages Directories

9% Internet Yellow Pages

4% Local Newspapers4% Local Newspapers

3% White Pages Directories

1% Television

4% Local Newspapers

4% Consumer Review Web Sites

2% White Pages Directories1% Television 2% White Pages Directories

2% Direct Mail

p. 13Source: Study by webvisible & Nielsen: The Great Divide 2008 (issued 2009)

Customer survey - continued

Search is the most widely used tool for finding a local business among consumers. Of h d 82% id h ithose surveyed, 82% said search engines

(such as Google, Yahoo!, or MSN) wereamong the many tools they used when seeking a local business Althoughseeking a local business. Althoughsearch clearly dominates among Internet users, consumers use search in combination with other local media.

49% Internet yellow pages

57% Yellow pages directories

82% Other search engines

53% Local newspapers

49% Television

37% Direct Mail

p. 14Source: Study by webvisible & Nielsen: The Great Divide 2008 (issued 2009)

Further information about searches

p. 15Source: Study by webvisible & Nielsen: The Great Divide 2008 (issued 2009)

Users like “online” in Europe, too

p. 16Source: FAZ (Jul 08)

Also in Germany local search is a significant market

p. 17Source: FAZ (Jul 08)

Overview

1. Introduction

2. Market

3. Segments & Funding

4 S f l l4. Successful players

5. Findings & Discussiong

6. About b-to-v

p. 18

Segmentation overview – USA (some examples)

1. Yelp: USD 31m funding from Bessemer Ventures, Benchmark Capital and DAG Venturesal

s

Ventures.

2. Insiderpages: Acquired by Citysearch (previous USD 8.5m funding from Sequoia Capital and Softbank)H

ori

zon

ta

Capital and Softbank)

3. Superpages.com: belongs to Idearc Media (Market Cap: USD 10m)

cals

H

4. HomeAway: USD 459m funding from Redpoint and Technology Crossover Ventures.

Vert

ic

5. Rocketlawyer: USD 2m fuding from Lexis Nexis

6. Angie‘s List: USD 66m funding from Battery Online

Ventures, BV Capital, Lighthouse Capital, among others.

7. Zillow.com: USD 87m funding from B h k C i l d L M

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Benchmark Capital and Legg Mason, among others.

Segmentation overview – Europe (some examples)

1. Gelbe Seiten: belongs to 16 regional publishers and DeTeMedien

als

2. Qype: USD 13m from Wellington Partners, Partech International and Advent Ventures

Ho

rizo

nta

3. Quoka.de: Leading classified portal (acquired by Vorarlberger Medienhaus)

4 Anwalt de: Portal with lawyer listingscals

H

4. Anwalt.de: Portal with lawyer listings (financed by private investors)

5. Blauarbeit.de: Auction portal for local i (fi d b i i )

Vert

ic

services (financed by private investors)

6. Imedo: Portal around medical issues (financed by privat investors)

Online

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Overview

1. Introduction

2. Market

3. Segments & Funding

4 S f l l4. Successful players

5. Findings & Discussiong

6. About b-to-v

p. 21

Selected Successful Horizontal Players in Europe

– Leading review portal in Europe focussing on lifestyle venues and restaurants

M h i h– More than 5m unique users per month

– Funding: Series B over EUR 8m from Wellington Partners, Partech International and Advent Ventures

– Financials: EUR 1.5m revenue (2008e)

– Germany's second largest directory assistance provider, employing roughly 2,400 staff at10 locations in Europe. Its "11880" brand has a market share of some 37% in Germany11880 brand has a market share of some 37% in Germany and is also a partner for many well-known mobile providers

– Market Cap: EUR 150m

– Financials: EUR 178m sales and EBIT of EUR 31m (2008e)

(in the short-term declines in classic directory assistance operations are increasingly being offset by ad-financed online

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operations are increasingly being offset by ad financed online local search)

Successful local advertising player in the US

– ReachLocal helps local businesses to attract customers via search engine advertising and online yellow-pages marketing

Funding: USD 64m from Vantage Point Ventures and others– Funding: USD 64m from Vantage Point Ventures and others

– Financials: USD 100m revenue

– Integrated advertising solution for local business focussing on a) search enginge marketing and syndication of listing, b) customized websites and c) lead management through click-to-callwebsites and c) lead management through click to call

– Funding: USD 25m from Bessemer Venture Partners, Draper Fisher Jurvetson Growth and Jafco Ventures

– Financials: USD 30m revenue

Further VC-funded players include in the US, among others,

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Not yet any major specialized players in Europe!

Overview

1. Introduction

2. Market

3. Segments & Funding

4 S f l l4. Successful players

5. Findings & Discussiong

6. About b-to-v

p. 24

Is this an attractive industry?

– Threat of new entrants: High as large international players with i d f l ffli l i h

– Bargaining power of suppliers: Medium but decreasing as buyers will put f d h h liindustry focus, large offline players with

industry focus and well-known brands, are likely to enter the market with relatively low barriers to entry (only costs)

forward that many other suppliers are available

– Rivalry high as generalists and specialists relatively low barriers to entry (only costs)

– Bargaining power of buyer: Medium but growing by the day as buyers get more sophisticated and will

have already occupied most of the attractive niches and will continue to battle for customers based on additional services and pricebuyers get more sophisticated and will

cease to accept high prices for simple ads; buyers will note that not everybody can have a fully optimized search engine

services and price

can have a fully optimized search engine position

– Threat of substitutes: Medium to high as buyers are aware thatMedium to high as buyers are aware that they could advertise their company on Google, Yahoo!, KennstDuEinen etc.

p. 25

Blueprint of an attractive invest

Core competences and success factors (and indicators towards promising investments):

– Focus on execution, i.e. sales towards long tail (call-center based, standardized service portfolio, high degree of automatization), compare to KennstDuEinen

– Known or at least self-explanatory brand name, if possible with a history (and somewhat credentials) from the offline world, e.g. GoYellow

f f f– Strategic focus of a „horizontal“ business model: Only attractive for established player suffering from poor management

– Strategic focus of a vertical“ business model: Attractive with exceptionalStrategic focus of a „vertical business model: Attractive with exceptional execution and focus on markets with premium leads (e.g. finance, law), most likely in large yet immature markets like Spain

p. 26

Food for discussion

– Will all business directories be killed by Google in the long-run?

– If so what would be their defense strategy given their strong brand awareness?If so, what would be their defense strategy given their strong brand awareness?

– M&A (last acquisitions: billiger.de, dialo)

More comprehensive local avertising solutions (compare stronger SEM– More comprehensive local avertising solutions (compare stronger SEM offerings with partners, activities of GoYellow Media)

– Given that Google relies on partners for the acquisition of local SMEs as this activity does not scale enough for Google itself how do efficient sales activities look like?

Experiences of successful online sales approaches– Experiences of successful online sales approaches

– Experiences with outbound call centers (conversion rates)

Experiences with street sales representatives etc– Experiences with street sales representatives, etc.

– Should vertical players extend their service offerings through closer collaboration with online marketing services (SEM, SEO, customized website)? If

p. 27

g ( , , )so, should they build these know-how in-house or outsource it?

Overview

1. Introduction

2. Market

3. Segments & Funding

4 S f l l4. Successful players

5. Findings & Discussiong

6. About b-to-v

p. 28

b-to-v at a glance

– At the heart of what we do is the b-to-v Investorenkreis, an exclusive circle of

entrepreneurial investors from Europeentrepreneurial investors from Europe

– b-to-v renders exclusive services to members of the b-to-v Investorenkreis, e.g. it

enables the confidential sharing of investment opportunities, supports the g pp , pp

processing and structuring of deals, and helps to manage and control

investments

– Admission to the b-to-v Investorenkreis is granted only to candidates who have

proven their business acumen, investment expertise, and personal integrity

– Our approach gives entrepreneurs the unique opportunity to discuss their

ventures and financing needs with senior entrepreneurs, benefit from their

experience their networks and receive funding from themexperience, their networks, and receive funding from them

p. 29

Cornerstones of the b-to-v Investorenkreis

– The b-to-v Investorenkreis has 54 members

Members come from various industry backgrounds (e g high tech internet– Members come from various industry backgrounds (e.g. high tech, internet, telecom, clean tech), and have

– founded > 100 companies

– and have invested in > 1’000 deals

– sold > 300

– realized > 100 IPOs

I th b ’ l di t it i t t l t t– In sum, the members’ annual direct equity investments volume amounts to EUR 20-25m

p. 30

Co-Authors

Florian Schweitzer (Partner) co-founded b-to-v and built its network of private investors since 2000. He studied Business

Alexander Stoeckel (Investment Manger) holds an MBA from the University of Oxford. Prior to b-to-v, he worked as fund-esto s s ce 000. e stud ed us ess

Administration at the University of St.Gallen.

,of-fund manager and as executive management assistant.

Sven Eppert (Investment Manager) studied Business Administration at the Catholic University Eichstätt IngolstadtCatholic University Eichstätt-Ingolstadt and the Warsaw School of Economics. Prior to b-to-v, he worked in asset

t d i lti

p. 31

management and in consulting.

b-to-v overview

Contact

BrainsToVentures AGBlumenaustr. 36 / P.O. Box 142CH-9004 St. Gallen

T 41 71 242 2000

Dr. Jan Bomholt, Partner and co-founder

Dr. Christian Schütz, PartnerContact T: +41 71 242 2000

F: +41 71 242 2001www.b-to-v.cominfo@b-to-v.com

Florian Schweitzer, Partner and co-founder

Christoph Schweizer, Partner

Dedicated people 54 members of the Investorenkreis

Core personnel 8 investment professionals

Deal flow p.a. (average) 1,500 business plansp g p

Deals done p.a. (average) 20

Investment strategy Opportunity driven

Geographical preferences Europe, USA and Asia

Financing stages Early stage, expansion stage, and later stage, as well as MBI and MBO projects

Most recent Exits Three IPOs (XING, Codfarmers, Fidor) and three trade sales (Cycleon, myBet, Plazes)

p. 32